New Law Affecting Mortgages - Dodd-Frank Wall Street Reform and Consumer Protection Act.- Oct 26, 2010 Archive
In July of this year, the president signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. Along with other provisions, it includes several dealing with mortgages that are particular interest to Realtors®:
Currently, creditors are prohibited from making a residential mortgage loan unless they make a good faith determination that at the time they grant it the consumer has a reasonable ability to repay it.
The new law creates a safe harbor from this requirement that limits the total points and fees collected by lenders and their affiliates to 3 percent of the amount mortgaged.
The law also has restrictions that prohibit yield spread premiums and other compensation to mortgage originators that varies based on terms of the mortgage loan, including rate.
Additionally, prepayment penalties for all loans that arent qualified mortgages are now prohibited.
The law includes appraisal requirements for higher-risk mortgages. First, a physical appraisal will now be required by higher-risk mortgages. If the property is to be sold within 180 days of purchase, a second appraisal will be required. Finally, a creditor will be required to provide the consumer/borrower with one free copy of each appraisal conducted for higher-risk mortgages at least three days prior to closing.
2010 - Nov-Dec issue